• by Amruta Ponkshe
Originally published in the OFLM 2024-07 edition
Overview
What happens when parties believe that they have reached a full and final settlement, but in actuality they have not? What happens when the terms of settlement do not provide sufficient clarity to complete the settlement?
Justice Chown in Mumtaz v. Ali (2024 ONSC 3216) addresses these issues and reminds us that when going to court, do your legal research. Specifically, show the judge the jurisdiction they have to make the orders that you are requesting.
Otherwise, you may meet the same fate the applicant husband met in Ali by having his motion to enforce an agreement dismissed.
Introduction
In Mumtaz v. Ali, the parties signed minutes of settlement to reflect what they believed to be a full and final settlement at a settlement conference held in July 2023. The minutes were incorporated into a consent order of Justice Doi.
Cut to March 2024, the applicant husband brought a motion to enforce the July 2023 settlement. The motion was heard by Justice Chown. The husband sought an order for the distribution of the net sale proceeds of the matrimonial home between the parties after paying back Legal Aid Ontario for the wife’s legal fees. He also sought an order compelling the respondent wife to “return” the car that she had been using but that was registered in the husband’s name.
The wife opposed the proposed distribution of funds. She claimed that the disclosure she received from the husband was incomplete. She also alleged that at the time of entering into the minutes of settlement she was not aware that, two days after separation, the husband had unilaterally withdrawn $160,000 from the parties’ joint line of credit.
Consequently, she requested a distribution of funds from trust on a different basis. She also requested an order that the car be transferred to her for $19,000. However, she did not bring a motion to set aside the July 2023 settlement. She simply indicated in her affidavit what order she was seeking.
The settlement
Justice Doi’s consent order mirrored the parties’ minutes of settlement which dealt with equalization and spousal support.
In terms of equalization of the parties’ net family properties, the order confirmed that the wife would receive $50,000 from the net sale proceeds from the parties’ matrimonial home in equalization. Thereafter, the remaining proceeds were to be divided equally between the parties.
The order failed to address any specifics regarding how the $50,000 equalization was calculated.
The order also stated that the husband would pay the wife an “inflated amount of spousal support” in the amount of $3,000 per month indefinitely. In lieu of this payment, there would be no child support for the parties’ two adult children.
At paragraphs 14 and 15, Justice Chown inferred that both parties had compromised to reach the settlement. The parties also chose not to provide the basis of the equalization in their minutes. While their reasons to do so may have been strategic or simply result-oriented, the conclusion was that the settlement had to be taken as a complete package. Each party may have compromised more than they wanted to on some aspects because they were satisfied with the compromise by the other party on other aspects. Justice Chown concluded that in such circumstances, it was not possible to unwind only part of the settlement, such as equalization.
His Honour referred to paragraph 10 of the Supreme Court of Canada’s decision in Rick v. Brandsema (2009 SCC 10) which states that “the best way to protect the finality of any negotiated agreement in family law is to ensure both its procedural and substantive integrity in accordance with the relevant legislative scheme”.
At paragraph 16, Chown J. commented that:
Where there is a trade-off resulting in a departure from substantive compliance with the legislative scheme (e.g., more on spousal support in exchange for less on child support and equalization), there is a greater risk that the settlement will not be upheld. That is not to say, however, that trade-offs are unacceptable. Settlements that do not strictly follow the legislative regime because they involve trade-offs can of course be valid and are frequently approved and upheld, but the point is that settlements involving such trade-offs may be more vulnerable to attack.
The incomplete settlement
What the parties believed to be a full and final settlement was, in fact, only a partial settlement.
Justice Chown took issue with the fact that the settlement did not deal with the Legal Aid lien relating to the wife’s legal fees. The lien was registered against the matrimonial home at the time of its sale. However, neither the minutes of settlement nor the consent order discussed its payment out of the sale proceeds.
The minutes and the consent order also did not deal with possession or transfer of ownership of the car. Although the car was registered in the husband’s name, it was purchased prior to separation and was paid for at least in part out of the joint line of credit.
Jurisdiction to enforce a purported settlement
The husband’s notice of motion did not refer to any rule or legislative position. Similarly, the wife did not bring any motion, only stating in her affidavit what order she sought. Neither party laid down the basis for the court’s jurisdiction to make the order they requested.
In such circumstances, Justice Chown had to determine the jurisdiction and the rules under which the court could make the requested orders. At paragraph 35, His Honour held that the question as to which rules are applicable was important because the applicable rules would govern the test to be applied.
After considering various provisions under the Family Law Rules, including Rule 18(13) (offers to settle) and Rule 16 (summary judgment), his Honour analyzed Rule 25(19) which dealt with changing an order. Justice Chown concluded that the issue of the possession and ownership of the car could have potentially fallen under Rule 25(19)(b) on the basis that the failure to address this was a mutual mistake, or under 25(19)(c) on the basis that the order “needs to be changed to deal with a matter that was before the court but that it did not decide.”
Justice Chown held that to obtain the relief the respondent wife requested in her affidavit, she should have brought a motion under rule 25(19) to change the order on the basis that the order contained a mistake.
His Honour concluded that the failure of both parties to define the basis for the relief requested in the motion was, on its own, a sufficient basis to dismiss the applicant husband’s motion.
Test to enforce a purported settlement
Justice Chown relied on the statement of law regarding the enforcement of settlement agreements as found in Zaidi v. Syed, Estate of, et al (2023 ONSC 1244), and affirmed in the recent appeal decision (2024 ONCA 406). Zaidi involved a settlement agreement parties reached in connection with an estates dispute.
In Zaidi, at paragraphs 13 to15, Justice Perell held the following:
A settlement agreement is a contract, and the court has jurisdiction at common law and under rule 49.09 to enforce settlements. A motion to enforce a settlement involves two elements. The first element is whether or not there is any genuine issue about the existence of an agreement to settle, and the second is to determine whether there is any reason not to enforce the settlement.
For there to be a binding settlement agreement, there must be a mutual intention to create a legally binding agreement and the essential terms of the agreement must have been agreed upon. However, it is not necessary to have reached agreement on incidental matters, such as the method of payment or the exchange of releases.
There is a strong presumption in favour of the finality of settlements; however, a settlement agreement is a contract and is subject to the law of contract formation, and a settlement agreement can be set aside in the same way that a contract may be rescinded for mistake, fraud, innocent misrepresentation, duress, undue influence, or unconscionability. (emphasis added)
Simply put, in order to enforce a purported settlement, the court should satisfy itself that there was in fact a settlement, and then ask where there is any reason not toe enforce the settlement.
What constitutes a settlement?
His Honour referred to Olivieri v. Sherman (2007 ONCA 491) and reiterated paragraph 41, which states the following:
A settlement agreement is a contract. Thus, it is subject to the general law of contract regarding offer and acceptance. For a concluded contract to exist, the court must find that the parties: (1) had a mutual intention to create a legally binding contract; and (2) reached agreement on all the essential terms of the settlement.
Taking from Zaidi, at paragraph 38, Justice Chown stated that:
The analysis of whether there was a settlement should be treated as a summary judgment motion. That is, it should only be held that there is a settlement if there is no genuine issue requiring a trial on this point. This applies not only in cases of accepted offers… but also in cases involving negotiated settlement agreements.
Justice Chown concluded that the parties had met the first requirement; that is, the parties had intended to conclude and thought they had concluded a binding full and final settlement. His Honour held that the question turned on the second element – whether the parties reached an agreement on all essential terms of settlement. They had not. The parties had failed to address all essential terms of settlement in the minutes they signed, specifically with respect to the ownership and transfer of the car and the legal aid lien.
Since there was no real settlement, there was no real possibility of enforcing it.
His Honour dismissed the husband’s motion without costs. It was held that the messy circumstance of the parties could only be resolved on a full factual record after a trial or if the parties attempted to reach a compromise.
Conclusion
Ali v. Mumtaz reminds to full-proof the settlements we help our clients to reach. This would be true whether it be by way of a separation agreement, an offer to settle or minutes of settlement. It is safer to err of the side of “too much detail” when drafting settlement terms than “too little”.
While there may be strategic or result-oriented reasons to not spell out every compromise or detail, it is imperative that a “full and final” settlement include resolution of all substantive issues arising out of a couple’s separation.